GLOBAL ECONOMICS

GLOBAL ECONOMICS

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C211 Study Guide Questions

The following questions are developed as a study aid for the C211 COS. They cover important concepts in each competency. The questions are not comprehensive but are only designed to serve as an indicator of your preparedness take the C211 assessment. After reading the material for each competency, use these questions to reinforce your understanding and review further as necessary.

COMPETENCY: Globalization (Peng Chapters 1, 5, 6, 11)
1- Explain the New, Evolutionary, and Pendulum views of Globalization. How do these differ from one another
2- What is Foreign Direct Investment
3- What different political views exist on FDI
4- What benefits exist to a country receiving FDI Elaborate.
5- What costs exist to a country receiving FDI Elaborate.
6- How do resources influence competitive dynamics of a business
7- How do capabilities impact the competitive dynamics of a firm
8- What is resource similarity and how does this impact competitive dynamics

COMPETENCY: International Trade and Foreign Exchange Market (Peng Chapters 5, 7, 10)
1- Give a description of the classical theory of international trade.
2- How would the modern theory compare to the classical theory
3- Compare absolute advantage to comparative advantage. What differences exist
4- What is mercantilism and why is this an important term
5- What are the critical features of the product life cycle
6- How would you describe strategic trade
7- How are supply and demand related to the exchange rate of a country
8- Which theory came first, mercantilism or modern-day protectionism
9- If a company seeks to limit foreign exchange rate exposure in the forward direction, what is the most effective way to do this
10- What is transaction risk
11- Explain the concept of “hedging” as it relates to reducing various types of risk.
12- What is the difference between currency hedging and strategic hedging
13- What advantages exist with first mover
14- What advantages exist with late mover
15- Consider the model of foreign market entries. How is scale-of-entry related/relevant

COMPETENCY: Political and Economic Forces (Peng Chapter 2)
1- How do institutions reduce uncertainty
2- Discuss and compare the three pillars (regulatory, normative, and cognitive)
3- Compare formal and informal institutions.
4- On what is the institution based view of global business grounded What core propositions lie at the root of this view
5- How is global business affected by democracy
6- How is global business affected by totalitarianism
7- What are the differences between democracy and totalitarianism
8- Explain the core features of civil, common and theocratic law How do they compare
9- What is a property right In what way are property rights essential
10- What is an intellectual property right
11- Contrast the market, command, and mixed economy types.

COMPETENCY: Consumer Behavior (Mankiw Chapter 21)
1- What is an indifference curve
2- What are the four properties of an indifference curve
3- Explain marginal rate of substitution.
4- What is a budget constraint
5- How might a budget constraint be impacted by an increase in income
6- What two graphical elements are needed in order to determine a consumer’s optimal point of consumption
7- How is a consumer’s optimal point of consumption determined precisely What is the condition that must be met

COMPETENCY: Firm Behavior under Different Market Structures (Mankiw Chapters 13-17)
1- How is marginal cost derived
2- How is marginal cost related to total cost
3- What is the specific formula to calculate marginal cost
4- If Dave’s company has a total cost of $100 when quantity output is 5, and a total cost of $115 when quantity output is 6, what is the marginal cost of producing the 6th unit
5- Total cost is made of two types of costs, what are they
6- How does a firm determine to shut down in the short-run What rule characterizes this
7- What is a price taker Which of the market structures are characterized as being “price takers”
8- When a market is characterized as being a price taker, what fundamental shape does the demand curve for this market take
9- How is the demand curve for a perfectly competitive firm distinct from the demand curve for a monopolistic market
10- What does “downward sloping” with regards to a demand curve mean
11- Where do firms with market power determine the quantity of product/service they will produce
12- What is the primary goal/objective of the firm
13- If the firm has price setting capacity, how will they use information about marginal costs and marginal revenues in order to accomplish their primary objective
14- Describe the basic distinctions between the market models with respect to: number of market participants, type of product being marketed, ease of entry/exit into the market, and the prevalence of advertising/marketing.
15- What fundamental truth is realized when studying the behavior of an oligopolistic firm within the context/model called “prisoner’s dilemma”
16- How might an oligopolistic firm behave like a monopoly What forces may prevent this

COMPETENCY: Macroeconomic Principles (Mankiw Chapters 29 & 34)
1- What tools does the Federal Reserve have with regards to monetary control
2- What are open market operations
3- When the Fed buys bonds, what impact does this have on the money supply and aggregate demand
4- When the Fed sells bonds, what impact does this have on the money supply and aggregate demand
5- What is a discount rate
6- When the Fed reduces the discount rate, what impact will this have on the money supply and the aggregate demand
7- When the Fed increases the discount rate, what impact will this have on the money supply and the aggregate demand
8- What is a reserve ratio
9- What would the Fed need to do with the reserve ratio in order to increase the money supply and aggregate demand in the economy
10- What would the Fed need to do with the reserve ratio in order to decrease the money supply and aggregate demand in the economy
11- If the Fed uses monetary policy in a way that increases money supply, what effect will this have on interest rates and aggregate demand (consider them separately)
12- If the government uses fiscal policy to increase government spending what impact will this have on interest rates and aggregate demand
13- If the government uses fiscal policy and cuts taxes, what effect will this have on interest rates and aggregate demand

COMPETENCY: Microeconomic Principles (Mankiw Chapters 4 & 5)
1- Explain the effect an income change might have on shifting the demand curve
2- What is the difference between a normal good and an inferior good Explain.
3- Explain how the price of related goods is related to changes in the demand curve
4- If Luke and I are the only sellers of paper in a given market, and Luke drops his prices for paper, how will this impact the demand for my paper Which way will the demand curve shift
5- What other factors might influence the position of the demand curve
6- What numerical value determines whether or not a product/service is considered price elastic versus inelastic
7- What is income elasticity and how is it measured
8- What is price elasticity of demand Explain the distinctions between elastic, inelastic, and unit-elastic.
9- What two results stem from income elasticity Why is this important to an economist
10- What is cross-price elasticity How is this defined and what result comes from this measure of elasticity
11- Can you summarize the 3 types of elasticity, their equations, purpose and outcomes
12- In the net, how are price (P) and quantity (Q) changed by a simultaneous increase in demand and supply
13- In the net, how are price (P) and quantity (Q) changed by a simultaneous increase in demand and decrease in supply
14- In the net, how are price (P) and quantity (Q) changed by a simultaneous decrease in demand and supply
15- In the net, how are price (P) and quantity (Q) changed by a simultaneous decrease in demand and increase in supply

COMPETENCY: International Trade (Mankiw Chapter 9)
1- Explain the concept of a tariff.
2- Explain dead weight loss.
3- How are tariff’s and dead weight loss related Explain.
4- What are the two primary categories of trade barriers that exist
5- If an import tariff is imposed on coconuts that are imported into the U.S., how will this impact the price of coconuts for U.S. consumers
6- Why might a government be interested in imposed an import tariff on a good What benefit would the government derive primarily
7- How would imposing an import tariff on cigars impact the domestic production of cigars
8- If an import tariff on coconuts was removed in the U.S., how would this impact the demand for coconuts by U.S. consumers
9- What would happen to the overall domestic demand for a good if an import tariff were imposed on that good
10- How does a tariff generally impact the following entities: consumers, producers, government Compare the effects between the entities.

COMPETENCY: Measuring Economic Performance (Mankiw Chapters 7 & 23)
1- What is consumer surplus
2- Who receives consumer surplus
3- In relation to the demand curve and price, how is consumer surplus measured
4- What is producer surplus
5- Who receives producer surplus
6- In relation to the demand curve and price, how is producer surplus measured
7- How is total surplus determined
8- In what ways might government or policy makers make use of surplus measures
9- What is the difference between macroeconomics and microeconomics
10- Why must income equal expenditure in an economy as a whole
11- Define gross domestic product (GDP). What does it measure
12- Describe the four components of GDP and explain how they affect aggregate demand.
13- Why are transfer payments such as social security not counted in government expenditures
14- What is the difference between real and nominal GDP Why do we need to measure GDP in real terms